Investment Update March 6, 2024

 

Economic data for the week included a minimal revision downward for 4^th quarter U.S. GDP growth, strong personal income results and continued decelerating PCE inflation, stronger home prices and new home sales, but weaker durable goods orders and ISM manufacturing data.

 

Global equities saw gains, led by continued strength in the U.S., with sentiment prompted higher by restrained inflation. Bonds fared well for the same reasons which produced falling yields. Commodities gained as well, led by energy supply considerations.

 

U.S. stocks continued a trend of gains last week, with small caps outgaining large caps. ‘Growth’ again outperformed ‘value,’ with optimism over artificial intelligence continuing to drive near-term sentiment. By sector, technology and consumer discretionary each gained over 2%, followed by increases in energy and materials. By contrast, defensives health care, utilities, and consumer staples lost ground. Real estate also rose several percent along with falling yields. Additionally, the cooler PCE inflation report helped markets breathe a sigh of relief, with weaker ISM manufacturing results boosting hopes for lower rates.

 

Foreign stocks earned gains, led by Japan and Europe, but underperformed U.S. equities, with negative returns from the U.K. and emerging markets. European sentiment was held back a bit by stronger-than-expected inflation and falling economic sentiment.

 

Bonds gained along with yields falling back last week, along with the PCE inflation and weaker manufacturing data. U.S. Treasuries outperformed investment-grade corporates and high yield, which in turn outgained floating rate bank loans. Corporate spreads widened a bit with the headwind of record-breaking debt issuance levels during the week. Foreign emerging market debt saw gains as well, despite little change in the U.S. dollar.

 

Commodities rose across the board last week, led by gains in energy and precious metals. Crude oil rose over 4% to $80/barrel, along with markets waiting for an OPEC+ decision about voluntary production cuts this coming week. Natural gas also spiked by 8% with lower inventory results and uncertain upcoming production rates.

 

 

For the 2024 filing season, only 19 electric vehicles qualify for tax credits, down from 43 variations in 2023. Electric vehicle and plug-in hybrid tax credit eligibility is based on the model variation and the MSRP limit (source: IRS).